Disputed Credit Accounts & FHA Loans
The dreaded manual downgrade for loans with disputed credit items. What does that mean?
It means that the file is no longer considered approved through Automated Underwriting and must endure a more stringent Manual Underwrite. And while that is not a deal killer for many borrowers, those with less than solid files might not pass that test.
Well, good news:We have gotten new guidelines regarding credit items disputed on th borrowers credit report.
Guidance for FHA Lenders on TOTAL Scorecard:
If the credit report reveals that the borrower is disputing any credit accounts, Manual Downgrade of a TOTAL Scorecard Approve/Accept recommendation is not required if:
1. The disputed account has a zero balance
2. The disputed account is marked as “paid in full”, or “resolved”
3. The disputed account is both
a. less than $500, and
b. more than 24 months old, based on the date of dispute.
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